[jahnesta8]

Brewster Co. has the following financial information:

Fixed costs $20,000

Variable costs 60%

Sales price $50

What amount of sales is required for Brewster to achieve a 15% return on sales?

a. $33,333

b. $50,000

c. $80,000

d. $133,333

S − 0.6S − $20,000 = 0.15S

S − 0.6S − 0.15S = $20,000

0.25S = $20,000

S = $20,000 ÷ 0.25

S = $80,000

Why do we assume that the 60% represents 60% of sales?

[How many letters do you need]

Jahn: Changing post because I misread your question. Variable cost % is always a percent of sales. Unless it states otherwise (and it would be weird if it did) you can safely assume % of sales

MBA,CMA,CPA, CFF?, ABV?

[How many letters do you need]

Jahn: Changing post because I misread your question. Variable cost % is always a percent of sales. Unless it states otherwise (and it would be weird if it did) you can safely assume % of sales

MBA,CMA,CPA, CFF?, ABV?

[NYCaccountant]

Because Variable costs are the only cost that change with the sales volume. They are generally a fixed percentage of sales, so the fact that variable cost is 60%, we know the company makes 40 cents on every dollar of sales in gross profit.

They'll need to sell 50,000 worth of merchandise to cover their fixed costs and 80,000 worth to cover their fixed costs and earn a return on sales of 15%. I wish I had questions like this on my test. Damn!

AUD - 99
BEC - 84
FAR - 93
REG - 87

NYC born and raised.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[NYCaccountant]

Because Variable costs are the only cost that change with the sales volume. They are generally a fixed percentage of sales, so the fact that variable cost is 60%, we know the company makes 40 cents on every dollar of sales in gross profit.

They'll need to sell 50,000 worth of merchandise to cover their fixed costs and 80,000 worth to cover their fixed costs and earn a return on sales of 15%. I wish I had questions like this on my test. Damn!

AUD - 99
BEC - 84
FAR - 93
REG - 87

NYC born and raised.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[How many letters do you need]

NYC: hahaha…they are never this easy on the exam.

MBA,CMA,CPA, CFF?, ABV?

[How many letters do you need]

NYC: hahaha…they are never this easy on the exam.

MBA,CMA,CPA, CFF?, ABV?

[jahnesta8]

NYC: “They are generally a fixed percentage of sales, so the fact that variable cost is 60%, we know the company makes 40 cents on every dollar of sales in gross profit.”

Is this true? A fraction of each sale still covers fixed costs, no?

[jahnesta8]

NYC: “They are generally a fixed percentage of sales, so the fact that variable cost is 60%, we know the company makes 40 cents on every dollar of sales in gross profit.”

Is this true? A fraction of each sale still covers fixed costs, no?

[Anonymous]

@Jahn It's true if you're using the variable costing approach. “Gross profit” would essentially be the “contribution margin” which just = sales – VC. Then you subtract fixed costs to get operating income.

[Anonymous]

@Jahn It's true if you're using the variable costing approach. “Gross profit” would essentially be the “contribution margin” which just = sales – VC. Then you subtract fixed costs to get operating income.

[NYCaccountant]

@CPAoneday – Thanks for cleaning that up.

AUD - 99
BEC - 84
FAR - 93
REG - 87

NYC born and raised.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[NYCaccountant]

@CPAoneday – Thanks for cleaning that up.

AUD - 99
BEC - 84
FAR - 93
REG - 87

NYC born and raised.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[jahnesta8]

CPAoneday: So it is essentially not the same. Gross profit is the difference between revenues and what it costs to make the product. Fixed manufacturing costs are part of the cost to make a product.

[jahnesta8]

CPAoneday: So it is essentially not the same. Gross profit is the difference between revenues and what it costs to make the product. Fixed manufacturing costs are part of the cost to make a product.

[Author]

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